Commission-Sharing Structure: The Hidden Villain of Real Estate?

Key Points:

• A spate of nearly two dozen court cases are shedding a harsh limelight on the old-school ‘buddy system’ in real estate, where commission-sharing is as common as listings on Zillow.
• The primary contention is that buyer agents have the superhero ability to direct attention away from listings that don’t promise them a hefty chunk of dollar bills.
• Essentially, if the listing isn’t a golden goose laying commissions, it’s as appealing as a moldy basement to most buyer agents. This arrangement, while ensuring agents’ wallets stay plush, raises serious ethical concerns.
• Opponents of the system argue it blatantly disregards potential homeowner’s needs and perpetually lines the pockets of agents, turning them into real estate Scrooge McDucks, diving into piles of commission bucks.
• It also hurts sellers, they claim, as homes listed with lower commissions aren’t given the same glamorous attention backstage as the supreme commission offerings.

The Sledgehammer’s Hot Take

Look, not to swing my hammer of cynicism too hard, but isn’t this just a dressed-up exposé of human nature? If you offer someone more money to do a task, they’ll gravitate toward it like a moth to a Zac Efron poster. It’s no news – that’s why salespeople receive commissions and why some of us walk dogs for that extra avocado toast fund.

What’s worth pondering here is not the existence of the commission-sharing model. It’s whether this particular dance game is distorting the real estate market in a way we should worry about, like a drunk uncle at a wedding.

Today’s platter of controversies suggests that the system requires some necessary adjustments. But then, doesn’t every model? Unlike pre-ripped jeans, things don’t come perfectly damaged. A lot of attention is being pointed at agents who prefer the listings exuding a strong ‘cha-ching’ vibe, and less is given to the unjust treatment of lower commission listings.

Our dear world of real estate may benefit from a quick crash course in ethics and fair play. Yet we shouldn’t overlook the simple fact that if buyer agents turned their noses up at every lower commission, we’d all live like hobos in a Monopoly game, passing ‘Go’ without ever owning anything fancier than an Old Kent Road.

Hopefully, these court cases will spur the industry for the better, leading to an estate agent’s utopia. In this perfect world, agents will kindly guide their buyers to the best suitable property, commission aside. Until then, it seems we’ll have to watch this old-school ‘buddy system’ waltz on, tripping over its own two commission-laden feet along the way.

Original article: https://www.inman.com/2024/02/12/utah-homeseller-files-commission-lawsuit-against-nar-13-others/